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Labour and employment: the Employment Relations Act

28 May 2008

The Employment Relations Act 2000 (the Act) is the principal statute governing employment in New Zealand.

The Act came into force on 2 October 2000. It aims to promote good faith in the employment relationship, and the right of workers to bargain collectively. Employers and employees may bargain individually and union membership is not compulsory, but all collective agreements must be negotiated and concluded by a union.

Amendments to the Act in late 2004 have, in general, strengthened the ambit of the good faith requirement and the ability of unions to bargain collectively. The changes have also introduced increased protection for workers when businesses are sold, merged or contracted out.

Good faith

One of the key principles in the Act is that parties to an employment relationship must deal with each other in good faith, and not do anything, either directly or indirectly, to mislead or deceive each other. They must be “active and constructive” as well as “responsive and communicative” in their dealings.

The Act also requires parties to bargain in good faith. Employers and employees/unions must, at a minimum, come to the bargaining table, listen, and respond to what the other party puts forward. Parties bargaining for a collective agreement must conclude the collective unless there are “genuine reasons” not to.

Further, an employer proposing to make a decision that may have an “adverse effect” on its employees must (subject to genuine confidentiality requirements) provide information about the decision and consult with their employees in good faith before the decision is made.

Sale of business / contracting out

As well as complying with the good faith / consultation requirements described above, in a sale, merger or contracting-out situation an employer must negotiate with the proposed purchaser/new employer in relation to their employees. Such negotiations must include discussion about who will be offered employment with the new employer, and on what terms and conditions.

The Act also contains special protection for “vulnerable employees” (primarily cleaning and food catering workers, as well as some other types of workers in specified sectors). The Act provides that vulnerable employees are entitled to transfer to the new employer as of right, and to bargain for redundancy payments with the new employer if their services are not required.

Employment agreements

The Act governs the negotiation, content and enforcement of employment agreements. Agreements must be in writing, and may be individual (between an individual employee and the employer) or collective (between one or more unions and one or more employer).

Ending the employment relationship

Most individual employment agreements are indefinite (i.e. they continue until terminated) but the law also recognises casual and fixed-term employment arrangements. Fixed-term agreements are subject to certain restrictions.

The employee can end an indefinite employment arrangement by giving the specified notice period. However, an employer can only terminate an employee’s employment where it has a genuine reason (possible reasons are limited to redundancy, misconduct, poor performance or incapacity) and it has followed a proper legal process.

There is no statutory right to redundancy compensation in New Zealand and, other than in very limited circumstances, compensation is only payable if this is provided for in the employment agreement.

Dispute resolution

The Act encourages mediation as the primary means of settling employment disputes. If mediation is unsuccessful, the parties may have their dispute decided by the Employment Relations Authority, an investigative body. If still unsatisfied, parties have a right of appeal to the Employment Court.

Very often employment disputes are solved in mediation, and do not proceed to litigation.

Strikes and lockouts

The only lawful strikes or lockouts are those which relate either to bargaining for a collective agreement or to health and safety issues.When a strike occurs, an employer can only use its existing employees to perform the work of the striking employees, and then only if the existing employees agree to perform the work. External workers may only be employed when the work is necessary for health and safety reasons.

Union access

Union representatives have a right to access a work place at reasonable times, in a reasonable manner, for purposes related to union business. Union business includes recruiting members.

Working conditions

Workforce

The total employed labour force at March 2008 stood at 2,141,000 people, with a labour force participation rate of 67.7% (Source: Household Labour Force Survey, Statistics New Zealand). In general, the workforce is well educated and well trained. There are occasional shortages of senior management and skilled technical employees.

Wages

A minimum wage has been established by the Minimum Wage Act 1983. The minimum wage for employees over the age of 18 is currently set at NZ$12 an hour or NZ$96 for an 8 hour day, or NZ$480 for a 40 hour week. The average ordinary time weekly earnings as at March 2008 was NZ$904.45 (Source: Quarterly Employment Survey, Statistics New Zealand).

Holidays and leave

In addition to 11 statutory holidays, the Holidays Act 2003 entitles employees to at least three weeks’ paid annual leave after 12 months of employment. It is common for senior employees to receive four weeks leave. The statutory minimum for all employees will increase to four weeks from 1 April 2007.

After six months’ continuous employment an employee is entitled to minimum of five days’ sick leave when they are sick or when their spouse, or someone who depends on them for care is sick or injured. Employees must carry over a minimum of 15 days of accumulated sick leave from year to year.

After six months’ continuous employment, an employee is also entitled to three days’ bereavement leave on the death of an immediate family member and one day’s bereavement leave in all other circumstances where the employer accepts that the employee has suffered a bereavement.

Parental leave

The Parental Leave and Employment Protection Act 1987 provides for both parents to take specified periods of parental leave (unpaid) on the birth or adoption of a child.

Payroll tax

In addition to KiwiSaver contributions and ACC levies (see below), employers in New Zealand are required to deduct “Pay As You Earn” payroll tax (PAYE). Deductions are either made on a fortnightly or monthly basis. The Inland Revenue Department (IRD) may also require other deductions such as payments towards student loans or child support.

New employers must register with the IRD to facilitate these deductions.

KiwiSaver

From 1 July 2007 all new employees must be automatically enrolled in the KiwiSaver superannuation scheme. Automatic enrolment does not apply to temporary employees or to most business sale situations. Employees who are automatically enrolled have a six week period in which they can opt out. Existing employees can also enrol in KiwiSaver if they wish.Employees who are members of KiwiSaver will have part of their gross earnings (either 4% or 8%) deducted and paid by their employer to a superannuation scheme. From 1 April 2008 employers will have to contribute 1% to the scheme. Employer contributions rise 1% each year to 4% by April 2011.

Government funded paid parental leave

Primary caregivers are entitled to receive up to 14 weeks’ paid leave of a maximum of $391.28 per week or 100% of the parent’s previous weekly earnings, whichever is lower.

To be eligible parents must have been in paid employment with a single employer for at least an average of 10 hours per week for at least 6 months before the birth or adoption of a child.

The scheme allows the mother of the child to claim the paid leave or transfer the payment to the child’s other parent whether they are the father or a same-sex partner.

Equal opportunities

Legislation is in place to ensure that employers cannot discriminate on the basis of an employee’s (or prospective employee’s) sex, marital status, religious beliefs, ethical belief, colour, race, national origin, disability, age, political opinion, employment status, family status, sexual orientation or union involvement.

Health and safety

The Health and Safety in Employment Act 1992 aims to prevent harm to employees and other people at work. Employers and employees in control of workplaces have a general obligation to take all practicable steps to prevent accidents occurring at work and (in some cases) can be criminally liable for failing to do so.

Accident compensation

In New Zealand, legal claims relating to personal injury are prohibited under the Injury Prevention, Rehabilitation and Compensation Act 2001. Instead, that Act provides a statutory scheme under which cover is available for those suffering personal injury, regardless of fault.

Coverage under the Injury Prevention, Rehabilitation and Compensation Act is broad based and includes most personal physical injuries, regardless of whether injuries occur in the workplace or elsewhere.

Compensation for injuries can take the form of payments for loss of earnings, healthcare treatment, cost of rehabilitation, independence allowance for disability, funeral expenses and death benefits for dependants. The scheme is funded from a number of sources, including levies on employers (linked to the amount of wages paid, with levy rates being determined on the basis of injury rates in the relevant industry), levies on employees, taxes on vehicle registration and taxes on petrol.

Accident compensation benefits are available to non-residents who are injured while in New Zealand. However, earnings-related compensation is not available to non-residents who derive their income from outside New Zealand.

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